The Energy System Review Committee (ESRC) which was appointed by the Minister for Trade and Industry to study the cause of the power failure on 29 June 2004, to identify strategic vulnerabilities in the energy system, and to make appropriate recommendations, has completed its review. It has submitted its report to the Minister and made recommendations to enhance the reliability and security of Singapore’s gas and electricity supply.

2         The ESRC started its work on 22 September 2004, and has met and conducted its review over a period of 20 weeks since then. It has interviewed all the energy players in the electricity and gas markets. It has also held dialogues with companies in the electronics, chemical, and pharmaceutical industries to get their feedback and perceptions on the incident and on power supply reliability and quality. The Committee met with officials from the Ministry of Trade and Industry (MTI) and the Energy Market Authority (EMA) to ensure an understanding of the policy and plans for the energy market. It also interviewed the West Natuna Onshore Receiving Facility (ORF) operator, ConocoPhillips, and visited their ORF on Jurong Island.

3         The key findings and recommendations are highlighted below.

Lessons learnt from the 29 June 2004 incident

4         The ESRC finds that the power failure on 29 June 2004 was triggered by equipment failure at ConocoPhillips’ ORF facility. It notes that there had been poor reliability performances since start up at this facility which has led to excessive gas supply disruption incidents. There has been 6 incidents affecting the West Natuna Gas Delivery System since the inception of this facility; 1 of these occurrences could possibly be construed as unavoidable. The other 5 instances were all related to equipment failure at the ORF and were avoidable. In the ESRC’s experience, this is an unacceptably poor level of ORF performance. This is in contrast with the other two gas supply pipelines to Singapore which have had no disruptions since inception, in one case over 10 years.

5        The ESRC also finds that the ORF facility had relied on contracted operational staff that had high turnover, and there was no record that staff had adequate training. There were issues with maintenance policy and lack of rectification of longstanding valve sticking problems which contributed to the severity of the incident.

6        The ESRC strongly recommends that the regulator, EMA, ensures that a firm timetable for rectification of problems at the ConocoPhillips’ ORF is agreed, adhered to and monitored. In addition, given the critical role of the ORF in the energy system, means should be found to penalize ORF operators in a meaningful financial way should there be continued reliability problems that put Singapore’s economy at risk. Furthermore, the ORF operators should be regulated to ensure that they achieve world-class performance, which in the ESRC’s opinion, should require no more than 1 system failure in 10 years.

7         Noting that out of 6 Combined Cycle Gas Turbines (CCGTs) affected by the gas disruption, only 1 CCGT by PowerSeraya successfully hotswitched ( i.e. timely changed the fuel from natural gas to oil products for its turbines), the ESRC views that the hotswitching process is technically complex and inherently unreliable. The process was particularly risky within the tight timeframes required by the lack of current gas system linepack[1].

8         The ESRC finds that the generation companies are well managed and have an appropriate focus on risk management generally, and on managing hotswitching in particular. Notwithstanding this, the ESRC recommends that the Power System Operator and the generation companies should review and monitor periodically:

a)              the communication system amongst the ORF    operators, gas and electricity industry players;

b)              the maintenance of hotswitching equipment, without abrogating the clear and sole accountability that the generation companies have for all Standard Operating Procedures (SOPs) and emergency response, including hotswitching; and

c)               the diesel supply system. The generation companies should have an SOP to ensure that they carry out regular maintenance and a rigorous risk assessment of the diesel supply system. They should also identify possible changes in the design of their diesel supply system to improve reliability.

9        The ESRC recommends that there should be a Gas System Operator established as a separate entity as a matter of priority. The Gas System Operator and the Power System Operator should be two divisions of a single entity with clear accountability to regularly assess the overall gas and electricity system risks and to develop integrated system emergency response actions to deal with such risks.

Longer term improvements to the energy systems

10      The ESRC views that Singapore should move as soon as possible to an open access, interconnected transmission and reticulation system for gas suppliers and users. By bringing in more sources of supply into the gas system, there would be increased competition for existing gas suppliers. It also supports the Government’s move to have the gas transmission and reticulation system owned by PowerGas as an open access common carrier, and urges that the SembGas pipeline should be fully integrated into PowerGas’ operation by end 2005.

11      The ESRC also recommends that the Network Code, which governs market participants’ behavior in the gas market, should be finalised and implemented as soon as practicable. However, before the Network Code is finalised, the ESRC proposed that EMA commissions a high level expert critique of the Network Code, which should focus only on essential issues to avoid unnecessary delays.

12             The ESRC recommends that the Government should establish an appropriate fuel policy for Singapore, which may include fuel type, fuel source, length and type of contract and location of fuel sources and dependence on these. It considers that such a policy will be an important input to decision making for the proposed LNG project.

13             A number of other more detailed recommendations have been made on possible improvements to the gas and electricity systems and the regulatory environment to improve reliability of the systems.

SECRETARIAT OF THE ENERGY SYSTEM REVIEW COMMITTEE

17 Mar 2005

For media enquiries, please contact:

Jeanette Lim (Ms)

ESRC Secretariat

Tel:  (65) 6332 7401

Fax: (65) 6334 2367

E-mail: jeanette_lim@mti.gov.sg